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  • New Western Energy Corp. (NWTR) Is “One To Watch” 0 comments
    Dec 28, 2012 6:01 PM | about stocks: NWTR

    New Western Energy continues piecing together an extremely solid portfolio of working interests across the rich hydrocarbon targets of the Gulf States region, with noted small-cap research firm, Zacks Equity Research, even bumping the price target ten cents recently (Dec 21) to $1.40 on the company's strong market cap to reserves ratio among others things, especially in light of the new Fields Lease acquisition in Kansas (Dec 20).

    The 300-acre Fields Lease (100% WI) has expanded an already firm, contiguous foundation in the Chautauqua Arch area held by the company via their 1.7k-acre B&W Ranch (90% WI, acquired in March of 2012) and 550-acre Smith Leases (90% WI, acquired in May of 2012). This brings NWTR up to 2,550 acres in prime Pennsylvanian age Cherokee basin shale, all of it contiguous (with southern district targets in the pre-Pennsylvanian reservoirs like the Weiser Sands and Wayside Sands). The gas and oil here flows from primarily the Mulky Shale and Weiser Sands reservoirs, offering up a target rich environment for new wells, and the company is laser-focused on acquiring additional interests in the Chautauqua County area (and elsewhere) through carefully selected acquisitions/partnerships.

    Looking at the new reserve estimate, post the Fields Lease acquisition, Zacks was confident of the upwardly revised price target from eleven days prior, showing some really nice forward revenue projections as well (ramping from $0.20M in Q1 2013 to $1.7M in Q4 the following year). The B&W Ranch Lease (engineering, reserve, and geological analysis via the Apr 25 agreement with Carroll Energy, LLC) for instance has such a great target array there is already obvious potential for three to four oil formation discoveries by NWTR, in addition to an equal number of gas formation discoveries. Both production zones are in quite shallow territory and in general we have reservoirs at a very manageable depth of around 600 to 1.4k feet across the leases, offering shareholders an approachable, economically feasible growth outlook.

    Turning further south past where the Central Oklahoma platform meets the Cherokee basin, across the border and east of Tulsa in Rogers County, are the company's Oklahoma assets. These assets include the over 120-acre Glass Lease (60.94% NRI) consisting of 14 wells secured via joint-venture with RC Oil Company back in 2009 and the 150-acre Glass Lease (60.94% NRI), also via the RC Oil JV. The properties are now overseen/operated by Petroleum Energy Management Co. (PEMCO), who secured the interests towards the end of 2011.

    PEMCO wrapped Phase I of the newest work-over program on the Glass Lease in September of 2012, with emphasis being primarily on jacking up output from the 6 production wells through redirected pressure maintenance and plugging of extraneous wells. Production continues on the site and the indicated probable/recoverable reserves were last calculated at around 287k bbls of oil from the Bartlesville Formation. The Phillips Lease has seven wells and one saltwater injection well, with shallow targets in the 500-foot range and 20 year old wells that are still producing like champs. The outlook is quite positive, especially considering the abundance of production in the district itself and ample room to work with at 150 acres.

    Jumping further to the south we have a set of five leases in Texas, located in Jones and Shackelford Counties, which make up the bulk of the company's remaining oil and gas production interests. It's a good idea to look at the Moran Lease (12 wells, eight lease units total) in Shackelford County first, as this 680-acre property recently (Oct 16) saw commencement of a comprehensive work-over program via the company's wholly-owned, Royal Texan Energy Co. subsidiary, focused on the Sam Cannon Well Unit. The two wells (#1 and #4) which make up the Sam Cannon churned out some 146.6k bbls of oil and 4.851M MCF of gas from August 1966 to February 1997, seeing 196 BOPD figures ($1.5M per quarter at current prices). Production is in the Mississippian zone (with a deeper Ellenberger secondary) at 3.9k feet but a packer and tubing section is lodged at around 2.5k feet in the #1 and was being pulled at last report from the well bore in advance of production restart.

    The most recent Geologist Report on the Moran Lease (which was picked up via the Royal Texan acquisition in January of 2012), pegged the combined recoverable reserves at over 183.8k bbls and 3.791M MCF of gas. Anticipation is high at NWTR to bring Moran output back up to past production levels while improving recovery efficiency by as much as 30%, with output steadily ramping up as the work-over program advances through 2013. Also acquired along with Royal Texan was the 580-acre Trice Lease, which has a series of 24 wells on the property in the shallow (500 to 700 feet) King Sand formation, as well as a battery of six injection wells. Trice saw the start of a work-over program as well in 2012 (April 9), with primary goals being a cost-effective increase in production rates, and work focused on four of the key wells (numbers 1, 3, 16, and 18).

    The other three Texas interests are in Jones County. The primary, 160-acre Swenson Lease is part of a JV with Texas-based operator, 3-M Production, via the company's wholly-owned subsidiary, New Western Texas Oil and Gas Corp. The Swenson saw good test drilling in March of 2011 that validated the sand and rock formation on-site. Subsequent geological analysis offers positive indications that as many as two more wells will be required in total to drain the entire field and all of the key elements have been identified as present at Swenson for considerable future production to take place, from hydrocarbon abundance in the reservoir rock, to the existence of a pronounced trapping mechanism. The property is sitting in the heart of some serious production history as well, including the Griffin Field (0.75 miles west) and the Iron Mountain - Avoca Pool Field (0.5 miles northeast), which collectively have produced in excess of a whopping 19.6M bbls.

    The Reves (84 acres with targets in the Flippen Sand, Gunsight Lime, and Swastika Sand in the 1k to 3k foot range) and McLellan Leases (160 acres with similar targets to Swenson and Reves) are adjacent to the Swenson and roundly reinforce an already strong acreage footprint. The McLellan is just a thousand feet northwest of the Jones County Regular Field, which has output some 40.6k bbls from the Flippen/Swastika Sands, and the company sees a lot of production potential here.

    Finally, over in Pennsylvania's Tioga County, we have the 23-acre Wellsboro Lease (100% WI) with a clear lead from a 1985 study that inferred the presence of a large (900k cubic yards) formation believed to be part of the state's famous Marcellus Shale that could turn into a sizeable natural gas discovery for the company. The site is a glacial-aged kame terrace where hydrocarbons apparently got trapped by glacial ice.

    The Zacks report shows some $24k in revenue at the end of Q3 2012, up 57.8% from Q2, a figure projected to grow from around $135k in Q1 of 2013, up to over $478k in Q4 2013 as multiple production wells come online, with the business growing from just a handful of stable producers to as many as 25 highly-efficient ones. Veteran leadership stands behind the aggressive portfolio management strategy at NWTR and it is quite clear to even the lay investor that the company has developed a compelling array of proven reserves backed up by the financial flexibility and pro-partnership attitude needed to delimit growth risk for the shareholders.

    For more information on New Western Energy, visit NewWesternEnergy.com

    Please see disclaimer on the QualityStocks website: disclaimer.qualitystocks.net

    Stocks: NWTR
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